A "Contract for Deed" (also known as a Land Contract) is used when a seller finances a property for a buyer. The IRS treats this transaction as an Installment Sale or seller-financed loan. In general, the buyer may deduct the interest portion of payments made under the contract and any property taxes paid on the property.
You may report the activity for these properties on Schedule E, found in the Rental Properties & Royalties section of TurboTax.
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Set up each rental property separately. You may can take depreciation based on the fully agreed-upon purchase price of the property.
Tenant payments would be rental income. Maintenance costs would be deductible rental expenses.
Payments to the seller must be allocated to principal (non-deductible) and interest (expense).
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